• Hunter Walk on Thinking Longer Term

    Hunter Walk.photoIt seems like yesterday that Hunter Walk and Satya Patel officially closed their first $35 million venture fund, but it was actually early last summer. And in the life of a seed-stage firm like Homebrew — where Walk and Patel have two-thirds of their capital reserved for follow-on investments — that’s an eternity.

    No wonder Walk – who previously worked for nine years at Google – and Patel – who logged a decade at Google, Battery Ventures, and Twitter – are already thinking about what a second fund might look like. Walk and I talked about it last week over a burger at a San Francisco eatery. Our conversation has been edited for length.

    You say you focus on the “bottom-up economy,” services and tools that make it possible for small players to compete with big companies, including, more recently, looking at bitcoin as a bottom-up currency; 3D printing as bottom-up manufacturing; and drones as bottom-up satellites. How else does Homebrew distinguish itself?

    We didn’t create Homebrew to create more noise in a crowded marketplace. We felt there was still a pretty small number of seed-stage funds that will be around for a long time, that have been started by former operators, and that want to take front-of-the-round positions.

    Why makes you better positioned than some?

    First, having a partner who has done venture before [is a big advantage]. There’s also a set of best practices and certain frameworks and models that we’ve thought about in advance — such as [around] what cash flow and portfolio management look like — that sometimes folks who’ve only come from an operating background or angel investor background don’t really understand.

    You’ve told me you could have raised more money last year. Will you go bigger the next time and will we see a third partner?

    That’s something we’ve discussed only lightly and I don’t think we’d do it in the near future. In some ways, we started Homebrew because we didn’t want to join existing funds . . . And so it’s this ironic situation where, if we were to try to find a third or fourth partner down the road, would we suddenly be the incumbent? How would we attract an entrepreneurial VC versus someone who just sees us as an existing fund? So we have to think about all that.

    I think the incentives are to raise more money, [between] management fees, ego, and deal flow optionality – you get exposed to a lot of things you want to invest in. But we’re not doing this to [eventually] raise a $500 million multistage fund or become a 12-partner business that builds out shared services and competes with billion-dollar funds. We know firmly which side of the [investing] barbell we want to be on.

    Roughly one year into this endeavor, what’s been the biggest surprise?

    With venture — and I think it’s one of the reasons I write so much, working through my own learnings – the fund cycle is long. Satya just saw two exits from companies he invested in at Battery in 2007 and 2008. So you want to bring a sense of urgency every day, to lean in and help [your startups], but you also have to manage your own energy and keep the founders who are burning hard every day in the right frame of mind.

    How?

    By making their lives simpler [and doing what you can] to clear the road ahead. We also ensure boards are formed with an outside board member. Most seed investors don’t ask for a board seat and don’t care if there’s an outside board member. We care a lot, not because we want control but because we want first-time founders to build confidence and a management cadence and, when it comes time to raise a Series A, signal to other investors that theirs is a company that’s been operating with some maturity.

    You don’t need a bunch of people around the table. But having worked for strong founders [at Google and Twitter] and seen the benefit of founder-driven companies — not just in year one but in year 10 — we want folks who are building something that, in their head, will be around a while. And our job is to help prepare them for that, because it’s not easy.

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  • VCs and Twitter: A Simple Relationship Turns Complicated

    VCs on TwitterOver the weekend, New York Times reporter Jenna Wortham wrote of Twitter that it “seems to have reached a turning point, a phase in which its contributors have stopped trying to make the service as useful as possible for the crowd, and are instead trying to distinguish themselves from one another.”

    If Wortham is becoming disillusioned with the platform, she’s hardly alone. Even venture capitalists – among Twitter’s savviest and earliest users –no longer view Twitter with the same zeal they once did, with a growing number turning away from the service for longer periods of time, if not logging off altogether.

    Chris Dixon of Andreessen Horowitz talked with investor-entrepreneur Semil Shah last November about why he no longer tweets as actively as he once did. “I actually think Twitter has changed,” said Dixon, whose tweet count is nearing 15,000. “Part of it is Twitter just got more popular…For me, the golden days of Twitter were 2010 maybe, 2011, where it was a bunch of early adopter/startup people…now, everyone realizes that if you say something wrong, it’s going to be excerpted and put on Business Insider…so I just think everyone is vastly more on guard, and it’s just not as fun.”

    On New Year’s Day, another power user, Shervin Pishevar of Sherpa Foundry, announced that after an astonishing 34,777 tweets dating back to 2007, he’d decided to “take a break” – for all of 2014. It was time to “disconnect from this overtly present present and live in the moment more,” Pishevar wrote on Medium, the newest publishing platform launched by Twitter’s cofounders.

    In a more recent renouncement of the platform, Paul Lee, a general partner at Chicago-based Lightbank, tweeted last Wednesday that he was “Going to be taking a break on twitter for a while (at least trying).”

    When afterward, I asked Lee why, he explained that Twitter “ended up taking a lot of mindshare and creating a lot of noise in my head.” Though Lee consumes more than he publishes (over the last six years, he has sent 2,342 tweets), he finds Twitter just as distracting as someone who more actively participates in conversations.

    “Imagine you’re in a meeting and you have eight people sitting on your shoulders,” he said. After logging on, even for brief periods, “It kind of felt like that. My mind was going 100 miles per hour.”

    Plenty of VCs still actively use Twitter, of course. Homebrew cofounder Hunter Walk says that among the ways it helps him as an investor is his ability to share his thoughts, meet new people, and “lazyweb” questions about who is working on what.

    Walker, who says he spends “toooo much” time on the platform (he has composed more than 18,000 tweets), says it doesn’t exhaust him primarily because he tries to use it “as a human being who also happens to be a VC.”

    Josh Felser, a cofounder of Freestyle Capital, similarly says that his approach is not to overthink things but rather “say mostly whatever I want.” Felser (12,600 tweets) also notes that Twitter is “helpful in building my business brand” particularly given that “most entrepreneurs are on it.”

    Lee acknowledges the same value in Twitter that Felser sees. In fact, he says Lightbank has funded two startups that it sourced through Twitter. “So from a branding perspective – meaning branding of [Lightbank] and self-branding – it’s been really effective.”

    Still, Lee says he’s prepared to avoid it for a while, even if he’s uncertain for how long. “It’s only been a few days,” he told me Friday morning. He said he was already feeling “less tied to it, less compelled to check it.” But he was also quick to call it “an experiment. I don’t want to get ahead of myself.”

    Meanwhile, the Twitter fatigued might pay special attention to Marc Andreessen, someone known for the shrewd way in which he has marketed his venture firm. A big fan of “counterprogramming,” Andreessen has taken to Twitter with great relish over just the last month.

    In the six years prior, he sent out two tweets.

    Correction: The original version of this story referred to Wortham by her Twitter handle, @jennydeluxe.

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  • Homebrew Separates Itself from the Pack

    Hunter WalkThis summer, yet another San Francisco-based, seed-stage venture fund was formed. Called Homebrew, the firm’s cofounders are Hunter Walk, who spent much of the previous decade working as a product manager at Google, and Satya Patel, who has bounded between operating and investing roles over the last 15 years, including most recently at Twitter, Battery Ventures, and Google, where he met Walk. The two began fundraising in January; they closed the fund with $35 million in late April and made the news official in July.

    Whether the firm can compete in what is an increasingly crowded part of the startup ecosystem is another story. Not only does Homebrew have many hundreds of angel investors and dozens of other seed-stage firms as competitors on deals, but it also has to contend with AngelList’s month-old Syndicates program, which enables angel investors to quickly mobilize a group of investors to back a deal.

    Homebrew’s timing might look lousy, but it will make sense over time, suggests Walk, who argues that there are still unexploited niches in seed funding.

    For starters, Homebrew is looking to lead or co-lead syndicates with initial checks of $500,000 to $800,000 as a part of an institutional round that’s between $1.25 million to $2.5 million. “There’s a lot of money from talented people who want to invest between $50,000 and $250,000 in companies, but a small number who want to step up and lead these rounds before there’s much data to crunch,” says Walk.

    Homebrew expects to back 20 to 25 startups with its first fund, and it intends to own 10 to 15 percent of each company for its efforts.

    Walk says Homebrew’s investment principles also set the firm apart. One of these is its focus on startups that level the playing field for individuals and small businesses. As an example, Walk points to Twilio, a service that helps developers build apps for text messaging and other services on phones. (Homebrew is not an investor.) Walk also highlights Plaid, a startup whose goal is to make it easier for developers to build financial applications. (Plaid recently raised $2.8 million from Spark Capital, Google Ventures, NEA, Felicis Ventures and Homebrew.)

    I ask Walk about the far bigger need in the market for Series B funding. After all, it often seems that there are too few funds to accommodate the many seed- and early-stage companies that are looking for follow-on investments. Does Homebrew risk watching its seed-stage deals fall off a cliff?

    Walk says Homebrew raised money from four institutional investors partly with that issue in mind. If Homebrew needs to raise more money to support its existing portfolio (à la the new Clover Fund of Felicis Ventures), it already has relationships with people in the business of writing big checks.

    Another point of differentiation with other seed funds? Walk says Homebrew’s startups (it has backed six so far) have solid business models involving monthly recurring subscriptions and transaction-based fees. While no guarantee of success, Walk figures this focus on revenue might help his companies’ chances of raising money from Series A and B investors when they go to market.

    “We didn’t pick ‘revenue-first businesses’ to time the market, or because we think they’re more fundable,” adds Walk. “But the type of companies we back do have clearer investment and exit paths.”

    Photo of Hunter Walk courtesy of Pinar Ozger.

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